32 was always the plan - unless they made it the base model and had 64 for 599 here in the UK. The initial raising of price of the 16 to 529 had me thinking id get that if the 32 went up as well, but it didn't so that just set 32 in stone.
32 is not nearly enough for all my music, but I seem to go through phases of listening to 5 or 6 albums at a time, and can't justify another 100 quid when I could just be a bit less lazy and sync different music every so often. Plus I still have my 2nd gen ipod touch which I wont be getting rid of.